CORRECTION: The original version of this story incorrectly reported the present OPEB liability. Warwick Post has corrected, and regrets, the error.
WARWICK, RI — This afternoon the Warwick City Council Finance Committee will hear an Other Post-Employment Benefits – OPEB and pension funding report and a proactive plan to meet the long-looming financial obligations.
Assuming the Police and municipal unions sign on to an agreement similar to the one with the firefighters union the City Council ratified Jan. 30, all three union’s employees would contribute to an OPEB trust, starting with the firefighters, as early as the final six months of the current Warwick Firefighter’s Union contract, ending in June 30, 2025.
Long discussed, routinely recommended yet never committed to, an Other Post-Employment Benefits (OPEB) trust would provide a way to move from the city’s current pay-as-you-go method of funding the OPEB liability, $352 million in 2019. The liability is now estimated at $397.4 million, according to the report Joe Newton of GRS Retirement Funding will present to the Finance Committee today.
With such a trust established, regardless of the funding, the city would immediately qualify for a discounted rate to be used to calculate its liability, Dennis Hoyle, Rhode Island’s auditor general, said in 2019.
The report also addresses the city’s partially funded pension plans, which represent a combined $353 million.
Newton’s report suggests:
- A “modified” pay-as-you-go system for the Police/Fire 1 pension plan, which has the bulk of the city’s pension obligation, at $304.8 million, with part paid up-front.
- Keep current strategies for the other open pension plans
- Set FY23 as a baseline pooled contribution amount to all retirement programs ($52.4M)
- Set a annual growth rate that the City can sustain (2.50% per year, for example)
- Use that growth rate to determine a total amount to be contributed across all the programs – $52.4m * 1.025 = $53.7M for FY24
- Then: – make all the required contributions into the individual programs – any balance left over flows into the OPEB trust
Last week, Council President Steve McAllister emailed citizens a brief summary announcing the report.
“On Monday, March 20th the City Council will hear a presentation from the City’s actuary entitled 2022 Retirement Valuation Updates and Proposed Funding Strategy. The presentation will be during the finance committee at 5pm. Both council members and residents will be able to ask the actuary questions. There will be no vote taken. This is for information only and will show us where we are in terms of our pensions and post employment benefits,” he wrote.
Newton’s powerpoint presentation, to be delivered to the Finance Committee today at 5 p.m., is embedded below:
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